Motability Operations issues bonds totalling £950m

Finance | 24 Sep 2009

Motability Operations, the not-for-profit service provider company to Motability, the UK’s leading car scheme for disabled people, raised £500m in September by issuing a seven-year bond with a coupon of 5.25 per cent.

This follows a £450m ten-year bond issued in April with a coupon of 6.625 per cent.

The bonds were issued as a result of a financial restructuring at Motability Operations which was completed in 2008. This facilitated access to a wider range of market-based funding than the mainly debt funding it had been relying on previously. Through this, Motability Operations plc gained A+ credit rating by Standard & Poors and A2 credit rating by Moody’s Investor Services.

According to its own website, Motability Operations is “regulated and overseen by the charity Motability”, but is actually owned by Barclays, HSBC, Lloyds Group and Royal Bank of Scotland (RBS). It has historically accounted for approximately 7 per cent of all UK car sales and, with annual turnover of £990m and a current asset value of £2.5bn comprising over 500,000 vehicles, it is the largest car leasing company in the UK.

A spokesperson for the company said that it is “a critical feature of the structure that Motability Operations Group PLC continues to be not-for-profit” adding that “any surpluses are reinvested back for the benefit of our customers” and that “the Banks as owners cannot access any reserves”.

The banks which own Motability Operations conducted the bond sales themselves with advice from KPMG. Motability Operations would not reveal the fees payable to their shareholders for this service claiming “this is commercially sensitive information and in line with usual practice we are unable to disclose”.

Directory: KPMG LLP | Royal Bank of Scotland (RBS)

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